Section 1031, Like Kind Exchanges

Teresa calls you to discuss her latest tax planning ideas. At a cocktail party last night she was mesmerized by a discussion of like kind exchanges. She now feels that like kind exchanges will be the solution to all of her tax problems. She just "knows" she should do the following like kind exchanges this year:

· Exchange her highly appreciated stock in Apple Computer (FMV $500,000 basis $10,000) for shares of General Motors.
· Exchange vacant land in Montana for a shopping mall in Illinois
· Exchange 2005 model year business truck (FMV $15,000 basis $50,000) for a new 2007 model year business truck
· Exchange excess inventory for new computers for the business
· Exchange vacation home in Hawaii for a vacation home in New York
· Exchange residential rental property in Florida for residential rental property in Tahiti
· Exchange apartment building in Texas for a residential rental in Nantucket

Discuss whether each proposed exchange qualifies as a like kind exchange. Are there any exchanges that qualify that you would recommend that Teresa not do? Why? Explain the rules that must be followed to properly execute a like kind exchange. Explain to Teresa how to properly structure an exchange if the property she wants to dispose of is not desired by the owner of the property that she wants to acquire.

Purchase Solution

Related Solutions

Which of the following exchanges qualify as like-kindexchanges under Sec. 1031?
a. Acme Corporation stock held for investment purposes for Mesa Corporation stock also held for investment purposes
b. A motel used in a trade or business for an apartment complex held for investment
c. A pecan orchard in Texas used in a tr

Sarah owns undeveloped land (basis of $350K) held as an investment. On October 7, 2006, she exchanges the land with her 27-year-old daughter, Ellen for other undeveloped land also to be held as an investment. The appraised value of Ellen's land is $500K.
a. On February 15, 2007, Sarah sells the land to Jeff, a real estate

You have a client who is in possession of 1,000 acres of farm ground. The farm ground was purchased 10 years ago for $160,000, and is now worth $2,000,000. The client wishes to sell the farm ground and purchase an apartment building of approximately equal value to his farm ground. How would you suggest your client obtain the r

Kevin exchanges an office building used in business for one owned by Charlene. The FMV of Kevin's building is $280,000 (basis $150,000) and it is subject to a mortgage of $50,000, which is assumed by Charlene. Kevin receives $30,000 cash and Charlene's office building, which has a FMV of $200,000 (basis of $180,000).
a. What is

Five years ago, Q&J Inc. transferred land with a $345,000 book and tax basis for a different parcel of land worth $472,000. Q&J included its $127,000 realized gain in book income, but the exchange was nontaxable. This year, Q&J sold the parcel of land received in the exchange for $533,000 cash. Compute Q&J's book and tax gain on

Dan in Florida wants to trade Liz in New York:
Dan's rental property is worth $350,000.
Dan's adjusted basis is $200,000.
Liz's rental property is worth $650,000 and has a $250,000 mortgage that will be assumed by Dan.
Dan will also give Liz $50,000 in cash at closing.
Liz's adjusted basis is $400,000.
What

Marta and Luka exchanged like-kind equipment under I.R.C. Sec. 1031 on December 31, 2010. Marta gave up equipment worth $100,000, with an adjusted basis of $60,000. Luke gave up equipment worth $70,000, with an adjusted basis of $65,000; as well as stock worth $30,000 that had a basis of $15,000.
a. Calculate Marta's realized

Taxpayer exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash. What is the
taxpayer's recognized gain?
a. $0.
b. $2,000.
c. $6,000.
d. $8,000.
e. None of the above.
Taxpayer exchanges a